Semiconductor stocks, the most notable laggards of the stock market over the past four years, are going to lead the market to new highs later this year...

The underperformance of semiconductor stocks earlier this year was a major warning sign for the broad stock market. Now, however, the broad market has suffered through a correction – a correction that may not be over just yet – but the semis are displaying relative strength.

Look at this chart that compares the performance of the semiconductor index (SOX) with the performance of the broader tech market as represented by the Nasdaq Composite (COMPX)...

During periods when the chart is declining, such as from last May through last July, semiconductor stocks are weaker than the broad market. That condition usually results in poor stock market performance.

When the chart is rising, such as the period from August through September, semiconductor stocks are stronger than the broad stock market. This action typically occurs during strong stock market rallies.

Notice the recent spike higher in the chart. Semiconductor stocks held up well compared to the rest of the market during the recent correction. That's no great surprise. Investors were simply selling stocks and locking in profits on positions that had moved up sharply.

Since the semiconductor stocks had lagged so badly, the sector was already sold out.

What is particularly interesting, though, is how the chart has broken above its downtrend resistance line. This action very likely signals a new period of outperformance for the semiconductor sector... and is a bullish sign for the stock market. After all, if semiconductor stocks run higher, then the rest of the market will follow along behind.

Over the past two weeks, the chart has come back down to retest the broken downtrend resistance line. This sets up a good low-risk/high-reward opportunity for conservative investments in the sector.

Legal Notices: Stansberry Research LLC (Stansberry Research) is a publishing company and the indicators, strategies, reports, articles and all other features of our products are provided for informational and educational purposes only and should not be construed as personalized investment advice. Our recommendations and analysis are based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.

Readers should be aware that trading stocks and all other financial instruments involves risk. Past performance is no guarantee of future results, and we make no representation that any customer will or is likely to achieve similar results.

Our testimonials are the words of real subscribers received in real letters, emails, and other feedback who have not been paid for their testimonials. Testimonials are printed under aliases to protect privacy, and edited for length. Their claims have not been independently verified or audited for accuracy. We do not know how much money was risked, what portion of their total portfolio was allocated, or how long they owned the security. We do not claim that the results experienced by such subscribers are typical and you will likely have different results.

Any performance results of our recommendations prepared by Stansberry Research are not based on actual trading of securities but are instead based on a hypothetical trading account. Hypothetical performance results have many inherent limitations. Your actual results may vary.

Stansberry Research expressly forbids its writers from having a financial interest in any security they recommend to our subscribers. And all Stansberry Research (and affiliated companies), employees, and agents must wait 24 hours after an initial trade recommendation is published on the Internet, or 72 hours after a direct mail publication is sent, before acting on that recommendation.

Stansberry Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties.
This website may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web),
in whole or in part, is strictly prohibited without the express written permission of Stansberry Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202.